BRIDGING PROGRAM

Noemi Jane O. Dinsay, CPA, LPT

Borrowing Cost
Quizzer
1. If the qualifying asset is financed by specific
borrowing, the capitalizable borrowing cost is equal to

a. Actual borrowing cost incurred

b. Actual borrowing cost incurred up to completion of
asset
c. Actual borrowing cost incurred up to completion of
asset minus any investment income from the
temporary investment of the borrowing
d. Zero
1. If the qualifying asset is financed by specific
borrowing, the capitalizable borrowing cost is equal to

a. Actual borrowing cost incurred

b. Actual borrowing cost incurred up to completion of
asset
c. Actual borrowing cost incurred up to completion of
asset minus any investment income from the
temporary investment of the borrowing
d. Zero
2. Borrowing costs can be capitalized as cost of the asset when

a. The asset is a qualifying asset and it is not probable that the

borrowing costs will result in future economic benefits to the
entity
b. The asset is a qualifying asset
c. The asset is a qualifying asset and it is probable that the
borrowing costs will result in future economic benefits to the
entity and the costs can be measured reliably
d. The asset is a qualifying asset and it is probable that the
borrowing costs will result in future economic benefits to the
entity
2. Borrowing costs can be capitalized as cost of the asset when

a. The asset is a qualifying asset and it is not probable that the

borrowing costs will result in future economic benefits to the
entity
b. The asset is a qualifying asset
c. The asset is a qualifying asset and it is probable that the
borrowing costs will result in future economic benefits to the
entity and the costs can be measured reliably
d. The asset is a qualifying asset and it is probable that the
borrowing costs will result in future economic benefits to the
entity
3. Which of the following is not a condition that must be
satisfied before interest capitalization can begin on a qualifying
asset?

a. Expenditures for the asset have been made

b. The interest rate is equal to or greater than the cost of capital
c. Activities that are necessary to get the asset ready for the
intended use are in progress
d. Interest is being incurred
3. Which of the following is not a condition that must be
satisfied before interest capitalization can begin on a qualifying
asset?

a. Expenditures for the asset have been made

b. The interest rate is equal to or greater than the cost of capital
c. Activities that are necessary to get the asset ready for the
intended use are in progress
d. Interest is being incurred
4. Which of the following statements is TRUE concerning
capitalization of the borrowing cost?

i. If the borrowing cost is directly attributable to a qualifying asset,

the borrowing is required to be capitalized as cost of the asset
ii. If the borrowing cost is not directly attributable to a qualifying
asset, the borrowing shall be expensed as incurred

a. Both I and II
b. I only
c. II only
d. Neither I nor II
4. Which of the following statements is TRUE concerning
capitalization of the borrowing cost?

i. If the borrowing cost is directly attributable to a qualifying asset,

the borrowing is required to be capitalized as cost of the asset
ii. If the borrowing cost is not directly attributable to a qualifying
asset, the borrowing shall be expensed as incurred

a. Both I and II
b. I only
c. II only
d. Neither I nor II
1. On January 1, 2020, Eris Company borrowed P6,000,000 at an annual interest
rate of 10% to finance specifically the cost of building an electricity generating
plant. Construction commenced on January 1,2020 with a cost P6,000,000.
 
Not all the cash borrowed was used immediately, so interest income of P80,000
was generated by temporarily investing some of the borrowed funds prior to
use. The project was completed on November 30,2020.
 
What is the carrying amount of the plant on November 30,2020?
 
a. 6,000,000
b. 6,520,000
c. 6,470,000
d. 6,550,000
Answer: C

Construction cost 6,000,000

Interest (6,000,000 x 10% x 11/12) 550,000
Interest income (80,000)
Total cost of plant 6,470,000
2. On January 1, 2021 Cindy Company obtained a loan of
P4,000,000 at an interest rate of 10% specifically to finance
the construction of its new building. Availments from the
loan were made quarterly in unequal amounts. Total
borrowing cost amounted to P250,000. Prior to their
disbursements, the proceeds of the loan were temporarily
invested and earned interest income amounting to P40,000.
The building was completed on December 31, 2021. What
is the amount of capitalizable borrowing cost?
________________
Solution:

Actual borrowing cost 250,000

Interest income on temporary investment of proceeds (40,000)
Capitalizable borrowing cost 210,000
3. On January 1, 2022 Blue Company borrowed P3,000,000
at annual interest rate of 10% to finance specifically the
cost of building. Construction commenced on January 1,
2022 with a cost P3,000,000. Not all the cash borrowed
was used immediately, so interest income of P80,000 was
generated by temporarily investing some of the borrowed
funds prior to use. The project was completed on
November 30, 2022. what is the carrying amount of the
building on November 30, 2022? ___________
Solution:

Construction cost 3,000,000

Interest (3,000,000 x 10% X 11/12) 275,000
Interest income on temporary investment of proceeds (80,000)
Total cost of building 3,195,000
4. BIOGESIC company borrowed 7,000,000 on a 8% note
payable to finance a new warehouse which the entity is
constructing for own use. The only other debt of the entity
is 9,000,000, 12% mortgage payable on an office building.
At the end of the current year, average accumulated
expenditures on the new warehouse totaled 8,500,000.
What amount of interest should be capitalized for the
current year?
Solution:

Average expenditures 8,500,000

Specific borrowing 7,000,000
General borrowing 1,500,000
Specific borrowing (7,000,000 X8%) 560,000
General borrowing (1,500,000 X12%) 180,000
Capitalizable interest 740,000
5. Jewelry Company had the following outstanding loans during 2017 and 2018.
Specific construction loan 3,600,000 10%
General loan 30,000,000 12%

The entity began the self-construction of a new building on January 1, 2017 and the
building was completed on June 30, 2018. The following expenditures were made:

January 1, 2017 4,800,000

April 1, 2017 6,000,000
December 1, 2017 3,600,000
March 1, 2018 7,200,000

Required: Compute for the cost of the building on December 31, 2017 and on June
30, 2018.
Solution:

December 31, 2017 = 14400,000+ 1,080,000=15,480,000

6. On January 1, 2021 Jimmy Company took out a loan of P15,000,000
in order to finance specifically the renovation of a building. The
renovation work started on the same date. The loan carried annual
interest at 10%. Work on the building was substantially complete on
October 31, 2021. The loan was repaid on December 31, 2021 and
P200,000 investment income was earned in the period to October 31 on
those parts of the loan not yet used for the renovation. What is the
amount of borrowing cost to be included in the cost of the building?
__________
Solution:

Interest incurred (15,000,000 x 10% X 10/12) 1,250,000

Interest income on temporary investment of proceeds (200,000)
Capitalizable borrowing cost 1,050,000
7. Dark Company had the following general borrowings during 2021 which were used to
finance the construction of the entity’s new building
Principal Borrowing cost
10% bank loan 2,800,000 280,000
10% short term note 1,600,000 160,000
12% long term loan 2,000,000 240,000
6,400,000 680,000
The construction began on January 1, 2021 and the building was completed on December 31,
2021. In the first phase of the construction, there were idle funds which the entity invested
and earned interest income of P62,500. Expenditures on the building were made as follows:
January 1 400,000
March 31 1,000,000
June 30 1,200,000
September 30 1,000,000
December 31 400,000

What is the amount of capitalizable borrowing cost? _______________

Solution:

Date Expenditure Months Amount

Outstanding
January 1 400,000 12 4,800,000
March 31 1,000,000 9 9,000,000
June 30 1,200,000 6 7,200,000
September 30 1,000,000 3 3,000,000
December 31 400,000 0 0
4,000,000 24,000,000

Average expenditures (24,000,000/12) 2,000,000

Multiply by capitalization rate (680,000/6,400,000) 10.625%
Capitalizable borrowing cost 212,500
Note:

PAS 23, par 14 provides that the amount of borrowing cost

capitalized during a period shall not exceed the amount of
borrowing cost incurred during that period. In this case, the
computed amount of P212,500 is the capitalizable borrowing cost
because it is less than the actual borrowing cost of P680,000. The
investment income of P62,500 is ignored because the construction is
financed by general borrowings.
8. Rene Company commenced construction of a new plant on February
1, 2021. The cost of P20,000,000 was funded from existing general
borrowings. The construction was completed on September 30, 2021.
Rene Company’s borrowings during 2021 comprised the following:

Bank X – 6% 8,000,000
Bank Y – 6.6% 10,000,000
Bank Z – 7% 30,000,000

What is the amount of borrowing cost that should be capitalized in

relation to the plant? ______________
Solution:

Annual interest

Bank X (6% X 8,000,000) 480,000

Bank Y (6.6% X 10,000,000) 660,000
Bank Z (7% X 30,000,000) 2,100,000
Total 3,240,000

Average interest rate (3,240,000/48,000,000) 6.75%

Capitalizable borrowing cost (20,000,000 X 6.75% X 8/12) 900,000

The construction period is 8 months from February 1, 2021 to

September 30, 2021.
9. Jojo Company borrowed P20,000,000 at 10% partly for general
purposes and partly to finance the construction of its building on
January 1, 2021. The loan shall be repaid commencing the month
following the completion of the building. Expenditures incurred evenly
during the year for the completed building totaled P12,000,000 on
December 31, 2021. Jojo earned interest of P200,000 for the year on the
unexpended portion of the loan. What amount of interest is capitalized
on December 31, 2021? __________
Solution:

Average expenditures (12,000,000/2) 6,000,000

Interest on average expenditures (6,000,000 X 10%) 600,000

The investment income of P200,000 is ignored because the construction is financed

by general borrowing.
10. Jboy Company borrowed P4,000,000 on a 10% note payable to
finance a new warehouse which the entity is constructing for its own
use. The only other debt on Jboy’s books is a P6,000,000, 12%
mortgage payable on an office building. At the end of the current year,
average accumulated expenditures on the new warehouse totaled
P4,750,000. What amount should Jboy capitalize as interest for the
current year? ___________
Solution:

Average expenditures 4,750,000

Specific borrowing (4,000,000)
General borrowing 750,000

Specific borrowing (4,000,000 X10%) 400,000

General borrowing (750,000 X 12%) 90,000
Capitalizable interest 490,000
Research and Development
Quizzer
1. Development activities include all of the following, except

a.Design of tools, jigs, molds and dies involving new

technology
b.Design, construction and operation of a pilot plant that is not
of a scale economically feasible for commercial production
c.Design, construction and testing of a chosen alternative for a
new or improved product or process
d.Laboratory activities aimed at obtaining new knowledge
1. Development activities include all of the following, except

a.Design of tools, jigs, molds and dies involving new

technology
b.Design, construction and operation of a pilot plant that is not
of a scale economically feasible for commercial production
c.Design, construction and testing of a chosen alternative for a
new or improved product or process
d.Laboratory activities aimed at obtaining new knowledge
2. Which of the following would be considered research and
development?

a. Routine effort to refine an existing product

b. Periodic alteration to existing production line
c. Marketing research to promote a new product
d. Construction of prototype
2. Which of the following would be considered research and
development?

a. Routine effort to refine an existing product

b. Periodic alteration to existing production line
c. Marketing research to promote a new product
d. Construction of prototype
3. Which is not considered a research and development activity?

a. Routine on-going effort to refine, enrich or improve quality of

existing product
b. Laboratory research aimed at discovery of new knowledge
c. Conceptual formulation and design of possible product or
process
d. Design, construction and operation of a pilot plant
3. Which is not considered a research and development activity?

a. Routine on-going effort to refine, enrich or improve quality of

existing product
b. Laboratory research aimed at discovery of new knowledge
c. Conceptual formulation and design of possible product or
process
d. Design, construction and operation of a pilot plant
4. Which of the following costs should not be capitalized?

A. Acquisition cost of equipment to be used on current and future

research projects
B. Engineering cost incurred to advance the product to the full
production stage
C. Cost incurred to file for patent
D. Cost of testing prototype before economic feasibility has been
demonstrated
4. Which of the following costs should not be capitalized?

A. Acquisition cost of equipment to be used on current and future

research projects
B. Engineering cost incurred to advance the product to the full
production stage
C. Cost incurred to file for patent
D. Cost of testing prototype before economic feasibility has been
demonstrated
1. Lakers Company incurred P400,000 direct cost of doing research
and development work for the government to be reimbursed by the
government. Other research and development costs incurred were:

Depreciation 300,000
Salaries 700,000
Indirect costs appropriately allocated 200,000
Materials 180,000

Wat is the total research and development expense? _______

Solution:

Depreciation 300,000
Salaries 700,000
Indirect costs appropriately allocated 200,000
Materials 180,000
Total Research and development expense 1,380,000
2. In 2019, Flor company incurred the following costs:

Laboratory research aimed at discovery of new knowledge 240,000

Cost of testing prototype but economic viability not achieved 60,000
Quality control during commercial production 360,000
Construction of research facility having an estimated useful life
Of 5 years but no alternative future use 480,000

What is the total amount of research and development expense for the current year?
Solution:

Total Research and development expense 780,000

3. On January 1, 2019, Weng company purchased two machines, Machine
1 for P1,500,000 and Machine 2 for 2,000,000. The machines were put
into use immediately. Machine 1 has a useful life of 5 years and can be
used only in one research project. Machine 2 will be used for 2 years on a
research and development project and then used by the production
division for an additional 8 years. The straight-line method of
depreciation is used.

What total amount should be recognized as research and development

expense for the current year?
Solution:

Total Research and development expense 1,700,000

4. In 2021, Joren Company incurred research and development costs as
follows:

Materials and equipment 3,000,000

Personnel 2,000,000
Indirect costs 1,000,000

These costs to a product that will be marketed in 2022. It is estimated that

these costs will be recouped by December 31, 2023. What total research
and development costs should be expensed in 2021?
Solution:

Materials and equipment 3,000,000

Personnel 2,000,000
Indirect costs 1,000,000
Total 6,000,000

All costs incurred are expensed immediately. In the absence

of any statement to the contrary, all research and
development costs are recognized as expense.
5. Ellen Company purchased two machines for P1,000,000 each on
January 1, 2021. The machines were put into use immediately. Machine A
has a useful life of 5 years and can be used only in one research project.
Machine B will be used for 2 years on a research and development project
and then used by the production division for an additional 8 years. Ellen
used the straight line method of depreciation. What amount should be
recognized as research and development expense for 2021?
______________
Solution:

Machine A – charged entirely to expense 1,000,000

Machine B – (1,000,000/10) 10,000
Total R and D expense 1,100,000
6. Joyce Company incurred the following costs during the current year:

Routine on-going efforts to refine, enrich or

otherwise improve an existing product 125,000
Design, construction and testing of preproduction models 110,000
Quality control during commercial production
including routine testing of products 150,000
Laboratory research for discovery of new knowledge 180,000

What is the total research and development expense?

Solution:

Design, construction and testing of preproduction models 110,000

Laboratory research for discovery of new knowledge 180,000
Total R and D expense 290,000
7. During the current year, Jorhen Company incurred the following costs:

Research and development services

performed by Kid Company for Jorhen 150,000
Design, construction and testing of preproduction prototypes 300,000
Testing in search for new products or process alternatives 200,000

What is the total research and development expense?

Solution:

Research and development services

performed by Kid Company for Jorhen 150,000
Design, construction and testing of preproduction prototypes 300,000
Testing in search for new products or process alternatives 200,000
Total R and D expense 650,000
8. Kaya Ko Company made the following expenditures during the current
year:

Costs to develop computer software for internal use

in Kaya Ko’s general management information system 500,000
Cost of market research activities 300,000

What is the research and development expense?

Solution:

Total R and D expense 0.00

The P500,000 cost should be charged to computer software and the

P300,000 cost should be classified as distribution cost.
9. Never Give Up incurred the following costs during the current year:

Design of tools, jigs, molds and dies

involving new technology 100,000
Modification of the formulation of a process 150,000
Trouble-shooting in connection with breakdowns
during commercial production 95,000
Adaptation of an existing capability to a particular
customer’s need as part of a continuing commercial activity 120,000

In the income statement for the current year, what amount should be reported as
research and development expense?
Solution:

Design of tools, jigs, molds and dies

involving new technology 100,000
Modification of the formulation of a process 150,000
Total R and D expense 250,000

The other two costs incurred are not R and D activities because they relate to
commercial production.
10. Amazing Grace Company incurred research and development costs in the current
year as follows:

Equipment acquired for use in various R and D projects 900,000

Depreciation on the above equipment 100,000
Materials used 200,000
Compensation costs of personnel 150,000
Outside consulting fees 120,000
Indirect costs appropriately allocated 210,000

What total research and development costs should be recognized as expense for the
current year?
Solution:

Depreciation on the above equipment 100,000

Materials used 200,000
Compensation costs of personnel 150,000
Outside consulting fees 120,000
Indirect costs appropriately allocated 210,000
Total R and D expense 780,000
Intangible Asset
Quizzer
1. Which condition must be met for an item to be recognized
as intangible asset other than goodwill?

a. Fair value can be measured reliably

b. The item is part of an activity aimed at gaining new
scientific or technical knowledge
c. The item is expected to be used in the production or
supply of goods or services
d. The item is nonmonetary, identifiable and lacks physical
substance
1. Which condition must be met for an item to be recognized
as intangible asset other than goodwill?

a. Fair value can be measured reliably

b. The item is part of an activity aimed at gaining new
scientific or technical knowledge
c. The item is expected to be used in the production or
supply of goods or services
d. The item is nonmonetary, identifiable and lacks physical
substance
2. One factor that is not considered in determining the useful
life of an intangible asset is

a. Residual value
b. Provision for renewal or extension
c. Legal life
d. Expected action of competitors
2. One factor that is not considered in determining the useful
life of an intangible asset is

a. Residual value
b. Provision for renewal or extension
c. Legal life
d. Expected action of competitors
3. What is the legal life of trademark?

a. 10 years
b. 20 years
c. 10 years and renewable after every 10 years
d. 20 years and renewable after every 20 years
3. What is the legal life of trademark?

a. 10 years
b. 20 years
c. 10 years and renewable after every 10 years
d. 20 years and renewable after every 20 years
4. An intangible asset is identifiable when
a. It is separable
b. It arises from contractual and other legal right
c. It is either separable or it arises from contractual and
other legal right
d. It is neither separable nor it arises from contractual and
other legal right
4. An intangible asset is identifiable when
a. It is separable
b. It arises from contractual and other legal right
c. It is either separable or it arises from contractual and
other legal right
d. It is neither separable nor it arises from contractual and
other legal right
5. The cost of successfully defending a patent from
infringement by a competitor should be

a. Amortized over the legal life of the patent

b. Amortized over five years
c. Expensed in the period incurred
d. Amortized over the remaining useful life of the patent
5. The cost of successfully defending a patent from
infringement by a competitor should be

a. Amortized over the legal life of the patent

b. Amortized over five years
c. Expensed in the period incurred
d. Amortized over the remaining useful life of the patent
6. It is the systematic allocation of the amortizable amount of
an intangible asset over the useful life.

a. Depreciation
b. Amortization
c. Allocation
d. Expiration
6. It is the systematic allocation of the amortizable amount of
an intangible asset over the useful life.

a. Depreciation
b. Amortization
c. Allocation
d. Expiration
1. On December 31, 2021, BB Blue Company exchanged 100,000 ordinary
shares of P50 par value for the following assets:

- A Trademark valued at P1,500,000

- A building, including land, valued at P6,500,000 (20% of the value is for
the land
- A franchise right. No estimate of the value is available at the date of
exchange
The ordinary share of BB blue company is selling at P90 on the date of
exchange.

What amount should be recognized as measurement of the franchise on the

date of exchange? ___________
Solution:

Fair value of shares issued (100,000 X 90) 9,000,000

Fair value of trademark (1,500,000)
Fair value of land (20% X 6,500,000) (1,300,000)
Fair value of building (80% X 6,500,000) (5,200,000)
Measurement of franchise 1,000,000
2. On January 1, 2018, Tiktok Company purchased a patent for
P7,140,000. The patent is being amortized over its remaining legal of
15 years expiring on January 1, 2033. During 2021, Tiktok
determined that the economic benefits of the patent would not last
longer than ten years from the date of acquisition.

What should be reported in the statement of financial position as

carrying amount of patent on December 31, 2021? __________
Solution:

Cost – January 1, 2018 7,140,000

Amortization for 2018, 2019 and 2020
(7,140,000/15x3) (1,428,000)
Carrying amount – December 31, 2020 5,712,000
Amortization for 2021 (5,712,000/7) (816,000)
Carrying amount – December 31, 2021 4,896,000
3. On January 1, 2018 Baba Company purchased a patent for a new
consumer product for P900,000. At the time of purchase, the patent
was valid for 15 years. However, the patent’s useful life was estimated
to be only 10 years due to the competitive nature of the product. On
December 31, 2021 the product was permanently withdrawn from
sale under government order because of a potential health hazard in
the product.

What amount should Baba charge against income during 2021 if

amortization is recorded at the end of each year? ________
Solution:

Acquisition cost 900,000

Amortization for 2018, 2019 and 2020
(900,000/10X3) (270,000)
Carrying amount – January 1, 2021 630,000

The remaining carrying amount on January 1, 2021 is

entirely expensed in 2021 and this includes the amortization
of P90,000 for 2021.
4. On January 1, 2021 Lalaban Ako Company bought a
trademark from Ayoko Na Company for P3,000,000. Lalaban
Ako retained an independent consultant who estimated the
trademark’s life to be indefinite. Its carrying amount in
Ayoko Na’s accounting records was P1,500,000. On
December 31, 2021 what is the carrying amount of
trademark? ____________
Solution:

The Carrying amount of trademark is P3,000,000.

The legal life of trademark is 10 years and may be renewed for

periods of 10 years each. Considering the almost automatic
renewal of a trademark, the trademark can be classified as an
intangible asset with indefinite life. Accordingly, the cost of
trademark is not amortized but tested for impairment at least
annually.
5. On January 1, 2019, Leni company acquired a
patent for a drug with a remaining legal and useful
life of 6 years for 6,480,000. The entity used
straight line amortization. On January 1, 2021, a
new patent is received for an improved version of
the same drug. The new patent has a legal and
useful life of twenty years. What is the amount of
amortization expense for 2021?
Solution:

Acquisition cost 6,480,000

Accumulated Amortization 2019 and 2020
(6,480,000/6X2) (2,160,000)
Carrying amount – 12/2020 4,320,000
Amortization for 2020
(4,320,000/20) 216,000
Carrying amount – 12/2020 4,104,000
6. On January 1, 2018, Trump Company purchased a patent
for 7,140,000. The patent is being amortized over its
remaining legal life of 15 years expiring on January 1, 2033.
During 2021, Trump determined that the economic benefits
of the patent would not last longer than ten years from the
date of acquisition.

What should be reported in the statement of financial

position as carrying amount of patent on December 31,
2021? ________
Solution:

Cost – January 1, 2018 7,140,000

Amortization for 2018,2019 and 2020
(7,140,000/15 X3) (1,428,000)
Carrying amount – December 31, 2020 5,712,000
Amortization for 2021 (5,712,000/7) (816,000)
Carrying amount – December 31, 2021 4,896,000
7. Sandy company acquired a copyright to a best seller novel
for 855,000 on January 1, 2017. The copyright has a
remaining legal life of 20 years.
Sales of the novel are estimated as follows:
2017 150,000 copies
2018 90,000 copies
2019 30,000 copies
2020 15,000 copies

What is the entry on 2018?

Solution:

Amortization of copyright 270,000

Copyright 270,000
8. Ice Giant Company purchased a patent on January 1, 2015
for P6,000,000. The original useful life was estimated to be
15 years. However, in December 2020 Icegiant’s controller
received information proving conclusively that the product
protected by the Ice Giant patent would be obsolete within
four years. Accordingly, the entity decided to write off the
unamortized portion of the patent cost over five years
beginning in 2020. What is the patent amortization for 2020?
Solution:

Cost – January 1, 2015 6,000,000

Accumulated amortization – December 31, 2019
(6,000,000/15 X 5)

Carrying amount – January 1, 2020 4,000,000

Amortization for 2020 (4,000,000/5) 800,000
9. On June 30, 2021 Fighting Company purchased for cash at
P50 per share all 150,000 ordinary shares outstanding of
Wow Company. The statement of financial position on June
30, 2021 showed net assets with a carrying amount of
P6,000,000. The fair value of property, plant and equipment
on June 30, 2021 was P800,000 in excess of carrying
amount. What amount should be recorded as goodwill on the
date of purchase?
Solution:

Acquisition Cost (150,000 X 50) 7,500,000

Fair value of net assets acquired 6,800,000
Goodwill 700,000

Carrying amount of net assets 6,000,000

Excess fair value of property, plant and equipment 800,000
Fair value of net assets 6,800,000
10. On December 31, 2021, Papasa ako Company purchased
for P30 per share all 200,000 of Top Company’s outstanding
ordinary shares. On this date, the carrying amount of net
assets was P5,000,000. The fair value of identifiable assets
on this date was P400,000 in excess of their carrying
amount. On December 31, 2021, what amount should be
reported as goodwill?
Solution:

Acquisition Cost (200,000X30) 6,000,000

Fair value of net assets acquired 5,400,000
Goodwill 600,000

Carrying amount of net assets 5,000,000

Excess fair value of property, plant and equipment 400,000
Fair value of net assets 5,400,000
THANK
YOU!